Vogel: Charter Could Be a System Buyer

3/14/2004 7:00 PM Eastern

By: MIKE FARRELL

Charter Communications Inc. CEO Carl Vogel said he would entertain the possibility of pairing up with a partner to acquire another major MSO, a strategy that seems to be a departure from the company’s most recent moves.

Charter, which had a net loss of 147,500 basic-cable subscribers in 2003, has been focusing on retaining customers and shoring up the balance sheet. In the past 12 months, it has agreed to sell about 250,000 subscribers in nonstrategic markets, raising about $820 million to pay down debt. Charter has identified another 250,000 customers in nonstrategic markets that it could sell.

But at the Bear Stearns & Co. Media, Entertainment & Information Conference in Palm Beach, Fla., on March 10, Vogel hinted Charter could be an acquirer.

GO AFTER ADELPHIA?

A questioner posited that Charter could form a partnership with a third party and go after another MSO — possibly Adelphia Communications Corp. raising Charter’s subscriber base to about 12 million customers. Vogel, in reply, said no such arrangements were imminent, but they wouldn’t be out of the question.

“I’m not against those kinds of deals at all,” Vogel said at the conference, which was Webcast on Charter’s Internet site. “I didn’t join Charter from my great cushy job at Liberty to run a 6.5 million-customer MSO. We would like to grow the company, we would like to consolidate assets, as I think everyone would in this business.

“To the extent those opportunities present themselves, we would encourage those and we would work with people to figure out how to make sense of that.”

Vogel was a senior vice president of Liberty Media Corp. before joining Charter in October 2001.

Charter dropped only about 41,000 subscribers in the fourth quarter, less than in previous periods. The No. 4 U.S. MSO has also been adjusting video and data packages in its retention efforts, offering two tiers of high-speed Internet service and introducing digital video recorders and HDTV in several markets.

Charter also has consolidated its call centers to 20 from 150 and has made inroads toward increasing profitability. Unlevered free cash flow (cash flow minus interest expense) in the fourth quarter was $133 million, a $255 million improvement over the same period in 2002.

BRITT’S WIRELESS IDEAS

Also at Bear Stearns, Time Warner Cable chairman and CEO Glenn Britt said his MSO is considering adding cellular telephone service to a bundled package of video, voice and data.

Time Warner has been pushing voice over Internet protocol telephony service hard over the past few months. VoIP service is available in three markets, and will be in all of Time Warner cable territories later this year.

Britt talked about the bundled package recently launched last month by SBC Communications Inc., including local and long-distance wireline service, cellular service, high-speed Internet and video through an agreement with EchoStar Communications Corp.

“My inclination is to say yes, we should have that [cellular] in our offering,” Britt said.

“Exactly how we go about doing that remains to be seen. I would not anticipate we would make a big investment in the business.”

Britt said cellular phone service could cannibalize wireline service offerings — particularly with college students.